After a much needed night of sleep, we all rode the city’s metro to Duomo, a major shopping center in Milan. Fashion is what Milan is known for, as it is considered the “fashion capital” of the world and today we learned first hand why the city has been given this nickname. We were given a tour of both the Gallery, where high end fashion designer brands were located, and leather shops, where various leather products are produced and designed. Despite differences in quality and price, both the Gallery and the leather shops are downstream suppliers in the supply chain hierarchy. This is because both types of stores purchase their leather from an upstream supplier (manufacturer) and transform that leather into various products. I also observed the theme of industry analysis between the two types of downstream suppliers because of the contrast between prices of leather products in the Gallery and the products of the leather shops because of various pricing and quality factors, as well as differences in competition of the two.
The Gallery is located in central Duomo. Positioned here were some of the biggest names and high end fashion designer stores such as Prada, Giorgio Armani, Dolce and Gabbana, Louis Vuitton, Gucci, and Versace. Because of the large demand and location in the city, these high end stores pay a premium price to rent, some costs even exceeding eight million euros per year. Their products can reach prices in the tens of thousands of dollars because of both their premium quality of leather, and also their reputable designer names. Since these companies attract a rather wealthy clientele where they are not so much worried about the price of the product, these companies compete more on quality. This results in the premium quality of all leather that they sell. Alternatively, these high end stores could compete on both price and quality, which will lower the profit for each purchase. However, a lower price would attract new/more customers and generate higher profits in the long run. After passing through the Gallery, we were taken to another, less crowded area of Duomo where we visited a few leather shops. These companies face a much higher demand for their products because of the more affordable prices that they offer based on a slightly lower quality leather and the fact they are not a top designer brand. Because of this strategy, they may have less time to spend creating and designing these leather products. Not to say that their leather products are not of good quality, it is simply the fact that their owners are more concerned with getting as many products made and sold, rather than focusing on one intricate piece being sold for a large profit. The owner mentioned how his competition has slowly declined because of the high rents that are charged for each store slot. To compete with the small amount of lower price leather product makers around, he relies on his rapid production of several leather products weekly to increase profits. This differs from the companies in the Gallery as they rely on profit off of few items rather than several. An alternative approach for these types of businesses can consist of the addition of preparing leather for higher end companies to sell to them, while still creating products to sell in their own stores. This could generate a higher profit for their smaller companies and provide them with opportunities to expand their businesses.
Personally, I agree with the high end stores approach, especially because of the location in Milan. Since this is the “fashion capital” of the world, the companies expect many regular wealthy clientele to return, as well and thousands of tourists to travel and shop. These stores in Milan sell at a much higher rate than would be expected in any other location. For example, a Louis Vuitton store in a mall would sell very few items when you compare it to the store in Milan. If the setting was in a mall in the United States, I would much rather prefer the leather shops approach of a large production and less focus on intricate design. Overall, based on the location I agree with the high end fashion approach in Italy.
A site that influenced my study abroad experience today was the Milan Cathedral church. The detail and longevity of the structure really put into perspective how important faith is throughout Italian culture. It was easily the most incredible structure I have ever seen. The church began construction over six hundred years ago, and is still in progress to this day. Not to put down Pitt’s Cathedral of learning, but the Milan Cathedral church just may have it beat!
Throughout the day I observed the theme industry analysis. The two types of firms that we visited today consisted of high quality designer brands such as Prada, and lower priced leather stores such as Gravi. Both stores sell leather made goods such as purses, luggage bags, book bags, and wallets, as well as several other accessories. Competition varies when comparing the two. The designer brands are surrounded by several other designer brands within a few feat of one another, making competition extremely intense. The competitors include Louis Vuitton, Prada, Giorgio Armani, and several other designer brands. Also high marketing budgets allow each designer to compete on commercial advertisements and online advertisements to endorse their products. Competition in the leather shops such as Gravity is quite a bit less intense and has been decreasing over the years as many shops have dropped out of selling their leather products near Duomo because of increased costs of rent. Also their much lower profits limit their ability to market their products. In conclusion, as stated, the challenges of the high end brands are faced because of increasing competition, and challenges in the leather shops arise because of increasing rent costs that force companies to leave the market in Milan.